Order in the matter of trading by connected entitites in respect of Alosha Vanijya P. Ltd

WTM/PS/06/IVD/ID-4/APRIL/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER In the matter of Temptation Foods Limited and Shree Precoated Steels Limited (now known as Ajmera Realty & Infra India Limited). In respect of Alosha Vanijya P. Ltd. (PAN: AACCA5623N) Date of hearing: December 23, 2011 Appearances: For Noticees: Mr. Manish Chhangani Mr. Shubhadip Choudhuri For SEBI: Mr. A.S. Mithwani, Deputy General Manager Mr. Siddhesh Lotlikar, Assistant General Manager Mr. Pradeep Kumar, Assistant Legal Adviser Mr. Parag Kumar Sinha, Presenting Officer ORDER Under Sections 11, 11(4) and 11 B of the Securities and Exchange Board of India Act, 1992 read with Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) during routine market surveillance, observed synchronized deals in several scrips which included Shree Precoated Steels Limited (presently known as Ajmera Realty & Infra India Limited) (hereinafter referred to as ‘SPSL’) and Temptation Foods Limited (hereinafter referred to as ‘Temptation’). On examination of the trade data relating to the above named scrips, inter-linkages between certain entities dealing therein were noticed in the form of off-market transactions as well as synchronized deals on the market. These entities having inter-linkages are collectively referred to as the ‘connected clients’. The name of these connected clients is placed at Annexure 1. The connected clients were found to be having large trading concentration in the abovenamed scrips and a substantial portion of their trading amongst themselves in synchronized nature was found to have contributed to the increase in the market volume. The preliminary investigation also revealed instances where delivery obligations of one connected client were fulfilled by the off-market borrowing of the shares from another connected client, and thereafter the borrower was seen to have bought back the shares from the market and returned the same to the lender through off-market transfer.

2. Pursuant to the preliminary investigation, SEBI restrained inter-alia Alosha Vanijya P. Ltd. (hereinafter referred to as ‘Alosha’/ ‘the noticee’) from accessing the securities market and further prohibited it from buying, selling or dealing in the securities market, directly or indirectly, till further directions, vide an ad interim ex-parte order dated June 04, 2009 issued under Sections 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’).

3. The said interim order also gave the noticee an opportunity to file objections, if any, to the order within fifteen days from the date of the order. Alosha filed its objections to the interim order vide letter dated June 18, 2009. Subsequently, an opportunity of personal hearing was granted to the noticee on July 08, 2009. After considering the objections and the material available on record, SEBI passed an order dated December 31, 2009 confirming its earlier order dated June 04, 2009.

4. SEBI had conducted the investigation relating to the trading in the scrip of Temptation for the period August 1, 2007 to February 28, 2009 and in the scrip of SPSL for the period October 1, 2007 to February 28, 2009 (hereinafter referred to as the ‘investigation period’) on the Bombay Stock Exchange Ltd. (hereinafter referred to as ‘BSE’). Thereafter, upon completion of the investigation, SEBI issued a notice dated July 25, 2011 (hereinafter referred to as ‘SCN’) to Alosha under Sections 11, 11(4) and 11B of the SEBI Act read with Regulation 11 of SEBI (Prohibition of Fraudulent Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) with respect to its trading in the scrips of Temptation and SPSL.

5. The SCN alleged that the noticee had executed synchronized transactions with connected clients, which resulted in the creation of artificial volumes in the scrips of Temptation and SPSL. The acts of the noticee were thus alleged to be in violation of Regulations 3(a), 4(2) (a) and (g) of the PFUTP Regulations. Accordingly, the noticee was called upon to show cause as to why directions in terms of Sections 11, 11(4) and 11B of the SEBI Act, including debarring it from accessing the securities market and prohibiting it from buying, selling or otherwise dealing in securities for an appropriate period of time, should not be issued against it.

6. The noticee, vide letter dated September 12, 2011 replied to the SCN and sought an opportunity of personal hearing. Accordingly, an opportunity of personal hearing was granted to the noticees on December 23, 2011, when Mr. Manish Chhangani and Mr. Shubhadip Choudhuri, the authorized representatives of the noticee, appeared before me and made submissions.

7. The submissions of the noticee, inter alia, are: a. Trading by the noticee in the scrip of Temptation and SPSL was for a negligible quantity of shares. The noticee traded in the scrip of Temptation on just 6 days, 2 days for buy trades and 4 days for sell trades, and the quantum of their transaction in the scrip was nominal, being 0.71% of the total purchases during the investigation period and 5.89% of the total sale during the investigation period. In the scrip of SPSL, the transactions by the noticee amounted to 1.67% of the total purchases and 0.92% of the total sale during the investigation period. The noticee traded in the scrip of SPSL only for 15 days. Its miniscule trading could not have led to an increase in the average traded quantity of shares. b. The transactions were delivery based. c. The noticee had no relation/ connection with any of the entities referred to as connected clients. d. The noticee’s trades were genuine trades, executed in the ordinary course of business. e. The noticee had other trades which are not alleged to be synchronized. If they were dealing in a fraudulent manner, all the trades would have matched with alleged connected clients.

8. I have carefully considered the ad interim order passed by SEBI dated June 04, 2009, the objections filed by the noticees, the confirmatory order of SEBI dated December 31, 2009, the SCN, reply to the SCN dated September 12, 2011, and all the material available on record.

9. I note that Chandra Financial Services P. Ltd. (“Chandra”), Kundan Leasing and Finvest P. Ltd. (‘Kundan’), Jay Investrade P. Ltd. (‘Jay’), HSM Financial Services P. Ltd. (‘HSM’)

and Shanti Financial Services P. Ltd. (‘Shanti’) have common directors namely Harsh Shirish Maniar and Jay Shirish Maniar and have common address at ‘Achal Bhuvan, 3rd Floor, 21 Modi Street, Fort, Mumbai’. Hence, these entities are related to each other and have been collectively referred to as ‘Maniar Group’. Further, it was also observed that the noticee had financial dealings with Maniar Group, Maruti Securities Ltd. (“Maruti”), Acme Craft P. Ltd. (“Acme”) and Sudhir Jain. I note that the noticee has submitted that it was not related/ connected to these entities. However, in its reply dated September 12, 2011 the noticee has itself given details of its financial dealings with the HSM, Jay, Acme, Maruti and Sudhir Jain. In the light of the same, it can be concluded that the noticee knew the aforementioned entities.

10. I further note that, in the scrip of Temptation, the noticee bought 68,850 shares and sold 5,68,850 shares on BSE during the investigation period. The noticee was already holding 5,00,000 shares of Temptation prior to the investigation period. The noticee bought 52,500 shares on January 14, 2009 including 21,000 shares bought from Sudhir Jain and 8,300 shares bought from Jay, a Maniar group entity. Subsequently, it is observed that the noticee sold 52,500 shares on January 16, 2009 of which 42,500 shares were sold to Acme through synchronized orders. It is alleged that the noticee placed a sell order of 10,000 shares at 12:10:07 hrs which matched in a time difference of 0:00:04 seconds with the buy trades of Acme. Further, two separate sell orders were placed by the noticee for 10,000 shares each, which matched in a time difference of 0:00:03 seconds and 0:00:01 seconds respectively. The illustrations are as under:- Trade Trade Trade Order Order Order Buyer Buy Sell Seller Traded CP CP Order CP Time Qty Rate Date No. Rate Time Qty Rate Name Member Member Name Qty Order Qty Order Diff DiffDiff Name Name Time Rate 16/01/09 10 123.00 12:10:11 10000 123.00 Acme CJ Dalal IL&FS Alosha 10000 12:10:07 10000 123.00 0:00:04 0 0 16/01/09 11 123.00 12:10:49 10000 123.00 Acme CJ Dalal IL&FS Alosha 10000 12:10:46 10000 123.00 0:00:03 0 0 16/01/09 12 123.00 12:11:13 10000 123.00 Acme CJ Dalal IL&FS Alosha 10000 12:11:12 10000 123.00 0:00:01 0 0

11. Further, the noticee bought 5,90,252 shares of SPSL and sold 3,26,110 shares of SPSL. Out of this, 5,12,844 shares were bought from and 1,14,345 shares were sold to the connected entities. Investigations revealed that the noticee bought 1,00,000 shares of SPSL on October 3, 2007 of which 87,005 shares were bought from the connected client Maruti in 5 trades out of which 4 trades were executed in less than 0:00:30 seconds.

Subsequently, the noticee sold 1,00,000 shares on October 4, 2007, of which 50,000 shares were sold to Maruti.

12. I note that the noticee has submitted that were several instances where the orders were placed with a considerable time gap. However, in illiquid scrips, as the trades are executed on the floor of the exchange on a price-time priority of orders, one cannot rule out the possibility of manipulative deals, even where the orders are not matched to the second. Furthermore, the noticee has submitted that it had executed other trades in the two scrips during the investigation period, which are not alleged to be synchronized.

13. Considering the discussion above, I note that the trades of Alosha have contributed to the creation of artificial volume in the scrip of Temptation and SPSL, in violation of Regulation 3(a) and 4(2)(a) and (g) of the PFUTP Regulations. However, the noticee has been restrained from accessing the securities market and prohibited from buying, selling or dealing in the securities market since June 4, 2009. The noticee has thus undergone debarment from securities market for more than two (2) years and nine (9) months. I find that the period of debarment already undergone by the noticee is proportionate to the violations committed by the noticee. In view of the same, I order as under:

14. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the SEBI Act read with Sections 11, 11B and 11(4) thereof, do hereby revoke the interim directions issued vide ad interim ex-parte order dated June 04, 2009 and confirmatory order dated December 31, 2009 against Alosha Vanijya P. Limited with immediate effect and also dispose of the SCN without any further direction.

DATE : APRIL 9, 2012 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA